Macau, the gambling capital of the world, reported nearly $37.9 billion (MOP 303 billion) in Gross Gaming Revenues for 2018. In recent months, Macau has been affected by the ongoing protests in Hong Kong due to the disruption in flight operations at the Hong Kong airport as well as by deteriorating investor sentiment in the wake of the unresolved U.S.-China trade deal.
Trefis details trends in key metrics for the Macau Gaming Market in an interactive dashboard, and takes a closer look at long- and short-term changes in gross gaming revenues and visitor arrivals in Macau to assess the impact of key parameters on the city’s huge casino business. We believe that while several factors have hurt Macau’s gaming market over recent quarters, the impact is largely temporary in nature and does not take away from the long-term growth potential of the gaming industry in the region.
Gross gaming revenues remain stable during the first two quarters
Gross gaming revenue is the amount retained by casino operators after paying respective wins to the players.
Macau’s GGR has risen steadily over the last two years thanks to strong growth in VIP and Mass segments.
Lately, VIP gaming has observed sharp declines due to stricter regulations by the Gaming Inspection and Coordination Bureau of the city’s junket operators.
In Q1’19 and Q2’19, VIP Baccarat GGR declined by MOP 5.7 billion and MOP 6.4 billion, respectively.
However, Mass Baccarat GGR increased by MOP 4.8 billion and MOP 5.5 billion, respectively.
The declines in VIP gaming have been mitigated by growth in the mass market segment, resulting in a relatively flat GGR for Q1 and Q2 (y-o-y).
Visitor arrivals have been trending higher
Visitor arrivals refer to the number of tourists coming to Macau from other regions and are reported by the Statistics and Census Service on a monthly basis.
Since 2015, the number of visitors in Macau has grown at a CAGR of 5.2% to 35.8 million in 2018.
The number of visitors from Mainland China has been growing at a faster rate than Hong Kong and other destinations.
Before the escalation of protests in July 2019, the number of visitors in Macau increased by 21% and 19% in Q1’19 and Q2’19, respectively.
Despite the protests in July, the number of visitors in Macau increased at by 16%.
Growth was primarily driven by same-day visitors, which account for near 50% of Macau’s tourists.
Low visitor spending possibly due to a decline in VIP gaming tourists
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Visitor spending refers to expenditure by tourists on non-gaming activities such as shopping, accommodation, food & beverage, and transport.
Shopping is the single largest expense category for same-day as well as overnight visitors.
Expenditure by same-day visitors has remained fairly stable over the last few quarters.
However, the expenditure by overnight visitors has fallen sharply in recent times, where shopping and accommodation expense category fell the most.
Considering the aforementioned factors, we believe that the sharp drop in shopping and accommodation category is due to a decline in VIP gaming tourists in Macau.
While the DICJ does not report GRR data by gaming activity on a monthly basis, we believe that the sharp drop in shopping and accommodation category is due to a decline in VIP gaming tourists in Macau due to the regulatory crackdown. However, considering the long-term trends such as the shift in consumer preference to mass market gaming and steady growth in visitation, we remain positive about Macau’s long-term popularity.